Question

The financial statements of the Ito Company are shown in Exhibit. Compute the following for the 20X2 financial statements.
1. Return on total assets (computed using EBIT in the numerator).
2. Divide your answer to requirement 1 into two components: EBIT-to-sales and total asset turnover.
3. After-tax rate of return on total assets. Be sure to add the after-tax interest expense to net income.


Statement of Income and Reconciliation of Retained Earnings


4. Rate of return on total stockholders’ equity including returns to both common and preferred stockholders. Did the preferred and common stockholders benefit from the existence of debt? Explain fully.
5. Rate of return on common stockholders’ equity. This ratio is the amount of net income available for the common stockholders, divided by total stockholders’ equity less the par value of preferred stock. Did the common stockholders benefit from the existence of preferred stock? Explain fully.
6. Calculate inventory turnover. How would Ito have been helped if it had been able to maintain the level of inventory from20X1?


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  • CreatedFebruary 20, 2015
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